Stakeholders in the housing and pension sectors are divided over the propriety of the deployment of the huge pension funds to close the housing gap in the country.
The National Pension Commission (PenCom) Director-General, Mrs. Chinelo Anohu-Amazu, said the 2014 Pension Reform Act, as reviewed, provided opportunities for increased investment of pension funds in infrastructure and housing development. The act, according to him, also allowed for a percentage of contributing workers’ Retirement Savings Accounts (RSA) balance to be used as equity contribution for mortgage.
Represented by Mr. Ibrahim Kangiwa, at a Mandatory Continuous Professional Development Programme of the Nigerian Institution of Estate Surveyors and Valuers, Lagos State Branch, the DG, however, noted that investment of the fund in housing was limited by the cumbersome nature of housing investment.
Presenting a paper titled: An overview of the Pension Reform Act 2014 and the provision for investment outlets in real estate sector, Mrs Anohu-Amazu said as at last May, the total value of pension fund assets under the management of the licensed pension operators stood at N5.6 trillion.
The DG explained that there was an effort by PenCom to increase pension investment in infrastructure and housing, and consequently urged stakeholders in pension administration to utilise the provisions of the Act for the provision of more infrastructure and real estate development in the country.
She explained that the new Pension Reform Act (PRA 2014), has made provisions for states and local governments to embark on pension fund investments in the housing sub-sector, a sharp contrast from the 2004 Act, which only included the Federal Government service. Pension contribution rate has since increased from 7.5 per cent for the employers and 7.5 per cent for employees to 10 per cent employers and eight per cent employees respectively.
Though she said the pension fund may not be used for real estate investment, Mrs Ahonu-Amazu expressed the readiness of PenCom to support mortgage financing as this will create more jobs, urging stakeholders in the real estate sector to device means of ensuring massive investments in housing provision, since the Act made provisions for increased investments in infrastructure and housing development.
“Direct investment is currently not allowed due to liquidity and valuation issues. Traditionally, real estate is complex; when you need to get your fund out, real estate may not be easily disposable,” she said.
The Association of Estate Agents in Nigeria Chairman, Mr. Chudi Ubosi, in his presentation, titled: ‘Investment of pension Fund and idle funds in housing development: The estate surveyor and valuer’s perspectives’’, argued that with about 17 million housing deficit, and the demand for housing put at 10:1 for demands and supply, about N59 trillion would be required to bridge the gap in housing. He said the sector contributes about 1.3 per cent to the nation’s Gross Domestic Product (GDP).
Ubosi regretted that housing is still low, saying that Lagos State, which has been described as the most vibrant property market in the country, still has home ownership at less than 20 per cent, and about 1, 500 net settlers daily in the state. He argued that all limiting laws and regulations preventing deployment of pension funds as well as direct investments in housing infrastructure be repealed without further delay.
“Nigeria is one of the few countries in the world with no mortgage. Funds may just be in the banks; there is the need to create financial products and mortgage backed securities,” he said, adding that the investment in housing should also focus on the lower end of the housing pyramid, while regulations should be amended to allow the PFAs put money in the Fund to enable them invest in housing.
However, the Managing Director, Stanbic IBTC Pension Managers Limited, Mr. Eric Fajemisin, disagreed with Ubosi, stressing that pension funds have not been idle. The majority of the funds, according to him, are being used for infrastructural development in the country.
Fajemisin, who spoke on: “Challenges and benefits for investment of pension fund in housing development in Nigeria and global approach, said one of the challenges in pension administration is that of about 180 million Nigerians, only a meagre seven million, representing four per cent, as at last March, are registered in the scheme.
The Stanbic IBTC Pension managers chief stressed that if Nigerians participate in the mortgage sector, it could contribute between 30 and 70 per cent to the nations’ GDP, reduce poverty and improve standard of living in the country.
He said the Federal Mortgage Bank (FMB) estimated that about N56 trillion would needed to meet the shortfall in Nigerian housing need, but the sources of housing finance are not adequately equipped to fund the supply deficits.
“The housing sector is supported by favourable demographics, but fraught with a huge supply deficit and ineffective demand. It can play a special role in the economic dialogue in Nigeria as it generates employment, increases productivity, raises standard of living and alleviates poverty,” he said.
NIESV, Lagos branch Chairman, Mr. Offiong Ukpong, said the pension fund, if well utilised, could solve the country’s housing needs and be a secured investment for the future. “If N20, 000 can buy a transistor radio for a worker now and instead of buying it, he decides to invest that money into pension fund, by the time he would be exiting the fund in 30 years, would that same money buy him the same appliance or furniture? Obviously not,’’ he argued.
The chairman of the occasion and a former president of the institution, Mr. Yinka Sonaike, said housing has been a recurring decimal in the country and that efforts should be geared towards reducing its deficit.
Source: The Nation